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Gannett Co. - Value

Gannett Co., Inc.
(
GCI
) is diversifying its business model by adding new revenue streams
in an effort to adapt to the changing face of the multiplatform
media universe. These endeavors have helped this Zacks #1 Rank
(Strong Buy) media conglomerate to gradually emerge as a true value
pick, as is evident from its compelling valuation, including a
price-to-earnings (P/E) multiple of 7.75.

What Makes Gannett a True Value Pick?

Gannett remains well positioned to harness the opportunities of a
rapidly changing business model, such as digitalization, in order
to keep itself on the growth path. The company recently provided an
update of its growth initiatives and stated that its long-term
objective is to attain annual revenue growth of 2% to 4%.

To achieve this, the company is focusing on its subscription-based
model and Digital Marketing Services products. Management expects
subscription revenue for the U.S. Community Publishing division to
increase 25% by the end of 2013, which would translate into a
contribution of approximately $100 million to operating profit.

For 2012, company-wide digital revenue is projected advance 19%
year over year to $1.3 billion, whereas retransmission revenue is
expected to jump 20% to $96 million. Retransmission consent fees
for 2013 are expected between $135 million and $140 million,
reflecting a more than 40% advance from the 2012 level.

Gannett now forecasts total revenue growth of over 5% and earnings
at 87 cents to 88 cents per share for the fourth quarter of 2012.
The company has surpassed the Zacks Consensus Estimate in 8 of the
past 10 quarters. The average surprise for the period was 4.6%.

The company posted third quarter earnings of 56 cents per share on
October 15, which beat the Zacks Consensus Estimate by nearly 4%
and rose from the prior-year period by 27.3%. The upside reflected
a surge in television advertising attributed to the Olympics and
political spending, and the subscription-based model.

Gannett's total revenue climbed 3.4% year over year to $1,309.3
million, due to an increase in revenues across the Broadcasting and
Digital segments, partially mitigated by a drop in the Publishing
division. Total revenue also came ahead of the Zacks Consensus
Estimate of $1,293 million.

Earnings Estimates on the Rise

The Zacks Consensus Estimate for 2012 rose 3.1% to $2.30 per share
over the last 60 days, as 5 out of 7 estimates were revised upward.
The current estimate implies year-over-year growth of 7.8%.

For 2013, the Zacks Consensus Estimate advanced 4.5% over the same
timeframe to $2.30 per share, thanks to 7 upward revisions out of 9
total estimates. The current estimate suggests year-over-year
growth of 0.2%.

Impressive Valuation

Gannett's P/E multiple remains below 15.0, suggesting a value
stock. Its price-to-book (P/B) ratio of 1.55 and price-to-sales
(P/S) ratio of just 0.79 are lower than the industry averages of
2.20 and 1.60, respectively. Volume is fairly strong, averaging
roughly 3,924K daily. It has a remarkable trailing 12-month ROE of
20.1%, compared with the peer group average of 16.6%. The company's
PEG ratio of 1.0 stands on par with the benchmark indicator and
indicates that the stock is reasonably valued given the long-term
earnings growth projection of 7.9%.

The company's stock price remains below 2012 and 2013 earnings
estimates, reflecting that the stock is still undervalued.
Currently, shares are in the range of $15.00 to $20.00, and have a
healthy year-to-date return of 36.7%, significantly higher than the
S&P 500's return of 10.7%.

Founded in 1906 and headquartered in McLean, Virginia, Gannett Co.,
Inc. operates as an international media and marketing solutions
company. It has a well-established presence across various
platforms, such as the Internet, mobile, newspapers, magazines and
TV stations. The company reports operating results under three
segments - Publishing, Broadcasting and Digital. Gannett, which
primarily competes with The New York Times Company (
NYT
), has a market cap of $4.11 billion.

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